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by BenjG
August 11th, 2014, 3:49 pm
Forum: Student Forum
Topic: Heston v/s SABR
Replies: 12
Views: 39344

Heston v/s SABR

<t>QuoteThe terminology saying the SABR model is "not a diffusion", while in contrast the Heston model is "traditionally diffused with its PDE" seems very poor to me. Mathematically, both processes are 2D diffusions, both have diffusion-type PDEs (u_t = L u), where L is elliptic, etc. You are just a...
by BenjG
July 26th, 2014, 11:45 am
Forum: Student Forum
Topic: Heston v/s SABR
Replies: 12
Views: 39344

Heston v/s SABR

<t>A few remarks on this old thread...Both Heston and SABR fit, more or less well, statically the smile (ie fit the distribution). However they are not designed in order to capture the same dynamics. SABR captures the Backbone while Heston captures forward volatility.If you want to hedge a European ...
by BenjG
June 4th, 2014, 8:46 pm
Forum: Book And Research Paper Forum
Topic: 10 quant finance research papers every newb should read
Replies: 4
Views: 6376

10 quant finance research papers every newb should read

Advanced subjects, but standard industry:Managing Smile Risk - Hagan et alFunding beyound discounting - PiterbargConvexity conendrums - HaganKnow your weapon - Espen HaugDynamic hedging - N.Taleb
by BenjG
June 4th, 2014, 8:08 pm
Forum: Technical Forum
Topic: CVA calculation
Replies: 2
Views: 5053

CVA calculation

<t>Just write down the equations:[$] \begin{align*} \mbox{CVA}(t) &= (1-R) \int_t^{t_m}{\mbox{EE}(s) d\mbox{PD}(t,s)}\\ &= (1-R) \int_t^{t_0}{\mbox{EE}(s) d\mbox{PD}(t,s)} + \int_{t_0}^{t_1}{\mbox{EE}(s) d\mbox{PD}(t_0,s)} + ...\\ &= (1-R)\sum_{l=1}^{m} \mbox{EE}_t(t_l) \mathbb{P}_{\tau ...
by BenjG
May 24th, 2014, 3:30 pm
Forum: Technical Forum
Topic: question about shifted-BGM...
Replies: 3
Views: 4939

question about shifted-BGM...

<t>Forget my stupid question... You are just using an homogeneous form of volatility: vol(t,T) = f(T-t) like an integrated Hull and White volatility I suppose (to get a non constant forward volatility).About your problem, having a negative volatility is not incorrect. However, a negative variance do...
by BenjG
May 24th, 2014, 8:25 am
Forum: Technical Forum
Topic: question about shifted-BGM...
Replies: 3
Views: 4939

question about shifted-BGM...

Why do you need the volatility to be a function of time ? If you consider a shifted BGM, then the forward follows a shifted LN diffusion where vol is a constant (possibly a term structure).I don't see why you need this functional vol(t)=h(t)*g(T-t) ?Ben
by BenjG
April 29th, 2014, 3:50 pm
Forum: Trading Forum
Topic: quant strategies
Replies: 5
Views: 6139

quant strategies

<r>QuoteOriginally posted by: mdsantosFor vanillas, in addition to trading your own account or selling IP to a sole buyer, these days another possibility is to market your strategy to a much wider community. ie. Most of the following sites still allow you to keep the IP while marketing to both retai...
by BenjG
April 11th, 2014, 9:06 pm
Forum: Technical Forum
Topic: Collateral Valuation Adjustment (ColVA)
Replies: 3
Views: 7568

Collateral Valuation Adjustment (ColVA)

<t>Hi,I am not sure to understand what you are meaning by ColVA. Is it an adjustment you want to compute because of multiple currencies in the collateral agreement ? If you want to compute the MtM of a vanilla swap that is collateralised, you only need to use the OIS curve for discounting and xM-Lib...
by BenjG
April 11th, 2014, 8:57 pm
Forum: Numerical Methods Forum
Topic: Hull&White Monte Carlo pricing
Replies: 3
Views: 5632

Hull&White Monte Carlo pricing

<t>Why not diffusing directly the ZC bond ? Use the fact that P(t,T_i,T_i + 3m) is a martingale under the forward risk-neutral measure associated to T_i and that P(0,T_i,T_i + 3m)=P(0,T_i + 3m)/P(0,T_i). Then using P(T_i,T_i,T_i + 3m) = P(T_i,T_i + 3m) you can get the corresponding Libor fwd.Moreove...
by BenjG
April 11th, 2014, 8:46 pm
Forum: Technical Forum
Topic: Inflation Jarrow Yildirim
Replies: 3
Views: 6185

Inflation Jarrow Yildirim

<t>You should look at the Belgrade Benhamou and Koehler framework, where one deals only with nominal rates and inflation. It is a market model that is much more simple and intuitive (because it relies only on traded instruments) than JY, allowing to derive quickly convexity adjustment (YOY and payme...
by BenjG
March 18th, 2014, 9:26 pm
Forum: General Forum
Topic: OIS discounting
Replies: 3
Views: 5513

OIS discounting

ICVS <GO>For exemple, select the curve number 23 if you need the USD OIS curve bootstraped from quoted OIS swap.
by BenjG
March 18th, 2014, 5:51 pm
Forum: General Forum
Topic: Why is financial research useless?
Replies: 46
Views: 10332

Why is financial research useless?

Ask to Jean Philippe Bouchaud if it is useless... Or any other quantitative trading firm.Or ask to V. Pitterbarg if it is useless to spend some time in order to formalise the market practice... I am sure that Barclays found it very useful ( OIS discounting ?)
by BenjG
February 21st, 2014, 11:07 pm
Forum: Trading Forum
Topic: $ MARKET ANALYSIS $
Replies: 2025
Views: 313846

$ MARKET ANALYSIS $

<t>QuoteOriginally posted by: edouardabout 100-day SMA (at 3'00'') : "this is not as commonly used, but is very very powerful for support and resistance and actually gives you an advantage because it is something that a lot of people don't see. So that provides what I call invisible support resistan...
by BenjG
February 14th, 2014, 7:29 am
Forum: Technical Forum
Topic: Perturbation Methods for Stochastic Vol Models
Replies: 14
Views: 7109

Perturbation Methods for Stochastic Vol Models

You can have a look at Analysis,Geometry and Modeling in Finance.Labordère focuses on the SABR model, using heat kernel expensions on Riemannian manifold.
by BenjG
February 7th, 2014, 3:21 pm
Forum: Technical Forum
Topic: Hull White - fitting the current term structure
Replies: 5
Views: 6616

Hull White - fitting the current term structure

<t>A simpler approach is to consider the zero coupons. In the HJM framework, the ZC are automatically calibrated to the current curve thanks to the ratio of ZC at the initial time that occur in the formula.Then you will diffuse the ZC in your numerical method (MC or finite differences). Indeed in pr...
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